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Yaxley v Gotts & Anor [1999] EWCA Civ 3006   Court of Appeal

Mr Yaxley was a self-employed builder. A friend and business acquaintance, Brownie Gotts, owned several properties which he let out. Mr Yaxley was interested in acquiring a block of six flats with a view of refurbishing them and then renting them out. For this purpose, he approached Brownie Gotts for a loan. However, Brownie Gotts suggested that he would purchase the property, Mr Yaxley would work on all the flats and then act as the managing agent in the lets, in return Brownie Gotts would transfer two of the flats to Mr Yaxley. Mr Yaxley orally accepted this offer and there was no written agreement so the requirements of s.2 Law of Property (Miscellaneous Provisions) Act 1989 were not met. In fact, the flats were purchased by Brownie’s son Alan Gotts. Unaware of this, Mr Yaxley carried out his side of the agreement spending over £2,000 on materials and a considerable amount of time. When the properties were completed, Mr Yaxley collected the rents and kept the rent of the two ground floor flats and passed the other rents to Alan Gotts. He had asked for some form of written evidence of the arrangement which Brownie Gotts had said he would produce, but never did. Mr Yaxley trusted him so never pushed the issue. Three years after the flats had been completed, Alan Gotts excluded Mr Yaxley from the property and Mr Yaxley commenced proceedings seeking a declaration that he was entitled to a long lease of the ground floor flats through either proprietary estoppel or through the imposition of a constructive trust. Mr Gotts argued that s.2 precluded the operation of proprietary estoppel.

Held:

Mr Yaxley was entitled to a grant of a 99 year lease of the ground floor flats through both estoppel and a constructive trust.

Clarke LJ:

“In my view the provision that nothing in Section 2 of the 1989 Act is to affect the creation or operation of resulting, implied or constructive trusts effectively excludes from the operation of the section cases in which an interest in land might equally well be claimed by relying on constructive trust or proprietary estoppel. That, to my mind, is the case here. There was on the judge's findings, as I interpret them, a clear promise made by Brownie Gotts to the plaintiff that he would have a beneficial interest in the ground floor of the premises. That promise was known to Alan Gotts when he acquired the property and he permitted the plaintiff to carry out the whole of the work needed to the property and to convert the ground floor in the belief that he had such an interest. It would be unconscionable to allow either Alan or Brownie Gotts to resile from the representations made by Brownie Gotts and adopted by Alan Gotts. For my part I would hold that the plaintiff established facts on which a court of equity would find that Alan Gotts held the property subject to a constructive trust in favour of the plaintiff for an interest in the ground floor and that that interest should be satisfied by the grant of a 99 year lease. I consider the judge was entitled to reach the same conclusion by finding a proprietary estoppel in favour of the plaintiff. I, too, would dismiss the appeal.”

Back to lecture outline on constructive trusts or proprietary estoppel in land law